On the 17th (local time), the three major indexes all fell on the New York Stock Exchange as the geopolitical crisis in the Middle East resurfaced, ending the session lower.
The Dow Jones 30 Industrial Average, which groups 30 U.S. blue-chip corporations, fell 272.63 points, or 0.51%, to 53,459.78 from the previous session. The Standard & Poor's (S&P) 500, focused on large-cap U.S. stocks, closed down 0.52% at 7,745.06. The tech-heavy Nasdaq composite also finished down 0.32% at 26,644.91. The S&P 500 and the Nasdaq logged declines for a second straight day.
The 60-day temporary truce agreement between the United States and Iran expired that day. But throughout the term of the agreement, the two countries failed to reach a conclusion in negotiations and remain at an impasse. Iran's state-run Tasnim reported that day that the Iranian government dismissed the possibility of extending talks with the United States. A senior Iranian official also told Reuters that "if diplomatic efforts fail, the Iranian government could shift from a defensive posture to an offensive posture." President Donald Trump, in an interview with Fox News, issued a strong warning over Oman, which had been mediating between Iran and the United States, saying, "If Oman hinders U.S. operations, I will bomb the entire nation of Oman."
As tensions flared again in the Middle East, global oil prices jumped immediately. West Texas Intermediate (WTI) futures rose 2.6% to $84.50 a barrel. Brent futures, the global benchmark, ended the transaction up 2.7% at $90.87 a barrel.
With oil prices surging, fears of a resurgence in inflation grew, and U.S. Government Bonds yields spiked that day (Government Bonds values fell). The U.S. 10-year Treasury yield, a global benchmark for long-term market rates, jumped to 4.726% a year. The 30-year Treasury yield, which responds sensitively to geopolitical events, hit 5.311% a year, the highest since June 2007, or about 19 years. Typically, when Treasury yields rise, funds in the stock market flow into Treasurys, a safe asset that pays interest with certainty, weighing on equities.
Wall Street analysts said instability in the Middle East and rising rates are weighing on market sentiment. Matt Malley, chief market strategist at Miller Tabak + Co., said the Middle East situation is highly unstable, pushing the 10-year Treasury yield back above 4.7%. He added that despite the moderate inflation data released last week, the persistence of elevated long-term yields is creating a significant headwind for investors.
Jason Stevens, founder of Everton Wells, also said market participants are monitoring the Middle East talks in real time, and explained that considering the upcoming U.S. midterm elections, the U.S. administration is under immense pressure to resolve the crisis. James Bullard, former president of the Federal Reserve Bank of St. Louis, said the U.S. economy is solid but inflation remains high, and assessed that now is actually the right time for the Federal Reserve to raise the benchmark interest rate.
Even in a broadly weaker market, semiconductor and artificial intelligence stocks posted strong gains. Investor sentiment toward AI-related tech stocks was stirred after reports that Anthropic, developer of the conversational AI chatbot Claude, achieved massive revenue growth in the second quarter. According to the report, Anthropic's second-quarter revenue topped $11.5 billion (about 15 trillion won), more than 14 times that of a year earlier. Operating profit also reportedly swung to a surplus.
As the numbers confirmed that the AI industry is still growing, semiconductor corporations rallied across the board. Micron Technology, which makes memory chips essential for AI servers, jumped 4%. Intel, a traditional U.S. chip heavyweight, and Broadcom, a communications chip corporation, also climbed. Nvidia, the bellwether for AI, likewise finished higher. The Philadelphia Semiconductor Index, which aggregates the share prices of 30 major U.S. chip corporations, rose 1.6% that day.
Refining stocks also benefited from higher oil and the geopolitical crisis, setting new record highs. With Russian refining facilities hit and logistics through the Strait of Hormuz in the Middle East blocked, refiners' margins on diesel surged to about $100 a barrel. Valero hit its highest price since its 1980 listing, and shares of major refiners including Marathon Petroleum and Phillips 66 also climbed to record highs.
By contrast, shares of global sports brand Nike plunged more than 4%, dropping to the lowest since September 2014, or 12 years. The decline was attributed to fast-growing upstart sports brands On and Hoka eating into the market and a slowdown in demand in China, a key revenue source. UBS, the Swiss investment bank and global financial group, noted that a recovery in Nike's brand growth drivers is uncertain.
Boeing, the U.S. aircraft manufacturer, fell nearly 2% after the U.S. Army temporarily halted flight training for the model following an Apache helicopter crash in Texas.
Investors are focusing on the Federal Open Market Committee (FOMC) minutes to be released this week and on earnings from major U.S. retail corporations. In particular, to gauge the flow of consumer expenditure, which accounts for two-thirds of the U.S. economy, attention is on results from big-box retailers Walmart, The Home Depot, Inc., and Target.
Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, a subsidiary of Royal Bank of Canada, said, "Debate in the market is divided over the resilience of U.S. consumers," and noted, "Even corporations are gradually acknowledging signs of a slowdown in consumption."